{"id":6939,"date":"2020-04-17T19:14:22","date_gmt":"2020-04-17T13:44:22","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=6939"},"modified":"2021-01-08T15:03:29","modified_gmt":"2021-01-08T09:33:29","slug":"difference-between-direct-tax-and-indirect-tax","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/difference-between-direct-tax-and-indirect-tax\/","title":{"rendered":"What is the Difference Between Direct Tax and Indirect Tax"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The government imposes taxes on both individuals and\ncompanies, which are a major source of income for the government. The amount\ncollected from taxes helps the government to build an economy that helps the\ngovernment meeting numerous public expenses. Taxation can be defined as\npecuniary burden that is imposed on individuals and corporations to support\ngovernment. Being a citizen of a country, it is the prime responsibility of the\ncitizen to pay taxes to the government. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-direct-tax-and-indirect-tax\/#What_are_legal_provisions_wrt_taxation_in_India\" >What are\nlegal provisions w.r.t taxation in India?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-direct-tax-and-indirect-tax\/#Types_of_taxation_in_India\" >Types of\ntaxation in India:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-direct-tax-and-indirect-tax\/#Direct_taxation\" >Direct\ntaxation:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-direct-tax-and-indirect-tax\/#Various_categories_of_Direct_Taxation_in_India\" >Various\ncategories of Direct Taxation in India:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-direct-tax-and-indirect-tax\/#Indirect_Taxation\" >Indirect\nTaxation:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-direct-tax-and-indirect-tax\/#Difference_between_Direct_taxation_and_Indirect_taxation\" >Difference\nbetween Direct taxation and Indirect taxation:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-direct-tax-and-indirect-tax\/#Conclusion\" >Conclusion:<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_legal_provisions_wrt_taxation_in_India\"><\/span>What are\nlegal provisions w.r.t taxation in India?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The taxation structure in India is based on three (3) tier systems as it\nis to be regularized and imposed by the Central authority, the State\nGovernments and the local authorities such as municipalities, councils, and\npanchayats. As per provisions of the Constitution of India, the right to levy\ntaxes on individuals and corporations is given to the government of India\nthrough various statutory authorities. The right to impose tax by central and\nthe state government has been defined under Article 246 read with Seventh\nSchedule of the Indian Constitution of India. As per that, No person other than\ncenter, state, and local authorities has the right to impose such taxes on any\nperson or company. Further such imposition is to be backed by law as passed by\na parliament or state legislatures. Schedule seventh (VII) have divided various\nsubject matters in 3 lists such as:<\/p>\n\n\n\n<p>&nbsp;<strong>List &#8211; I<\/strong> \u2013 under which only central government has authority to\nmake and imposes taxes called as central list;<\/p>\n\n\n\n<p><strong>List &#8211; II<\/strong> \u2013 under which only state government has authority to\nmake and imposes taxes called as state list;<\/p>\n\n\n\n<p><strong>List &#8211; III<\/strong> \u2013 under which both central government and the state\ngovernment has authority to make and imposes taxes called as concurrent list<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_taxation_in_India\"><\/span>Types of\ntaxation in India:<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In order to fulfill this obligation, it is important to know different types of taxation in India. These taxes can be classified into two categories:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" width=\"576\" height=\"339\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/04\/image-61.png\" alt=\"Types of taxation in India\" class=\"wp-image-6940\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/04\/image-61.png 576w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/04\/image-61-300x177.png 300w\" sizes=\"(max-width: 576px) 100vw, 576px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Direct_taxation\"><\/span>Direct\ntaxation:<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Direct tax is such tax that a citizen directly pays to the government or the authority that is imposing the tax. For instance, as in India, <a href=\"https:\/\/corpbiz.io\/income-tax-return-filing\">Income tax <\/a>authority imposes a tax, so citizen shall pay the tax directly to the income tax authority. This tax cannot be transferred to some other entity or authority. Direct tax in India is regularized by several provisions of laws and authorities responsible for its administration. Such authority in India is the Department of Revenue through CBDT (Central Board of Direct Taxes), which looks after the administration and management of direct taxation. This department is also authorized with the power of planning and further to provide inputs to government authority in this respect.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/assessment-of-income-tax-notice\/\">An Overall Assessment of Income Tax Notice<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Various_categories_of_Direct_Taxation_in_India\"><\/span>Various\ncategories of Direct Taxation in India:<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Some of the major types of direct taxation in India are as mentioned below:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" width=\"576\" height=\"339\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/04\/image-62.png\" alt=\"major types of direct taxation in India\" class=\"wp-image-6941\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/04\/image-62.png 576w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/04\/image-62-300x177.png 300w\" sizes=\"(max-width: 576px) 100vw, 576px\" \/><\/figure>\n\n\n\n<ul><li><strong>Income tax<\/strong>: <\/li><\/ul>\n\n\n\n<p>This is one of the most common kinds of direct tax imposed in\nIndia. This tax is directly levied on income earned by an individual during a\nfinancial year as per income slabs provided by the income tax department.\nProvisions related to income tax are mentioned and regulated as per the\nprovisions of the Income Tax Act of 1961. As per the said provisions, tax is to\nbe imposed on earning or income of any individual or any undivided Hindu family\nor any trust or co-operative society, etc. This income is to be calculated on\nthe basis of the residential status of a person for which points have to\ndetermine while calculating the same. All residents of India are liable to pay\nsuch tax for income generated in India as well as abroad. Whereas non-residents\nare taxable only for income generated or received in India only and not outside\nIndia.<\/p>\n\n\n\n<ul><li><strong>Corporation tax:<\/strong> <\/li><\/ul>\n\n\n\n<p>As per the provisions of the Income Tax Act of 1961, every\nIndia Company and any business organization are taxable in India for their\ntransactions all over the world. Any company or corporation is deemed to be a\nresident of India if it was incorporated and registered in India, and its\noverall management and control are based in India only. For any non-resident\ncompanies, only such income is levied in India under this category if the\nbusiness transaction was done in India.<\/p>\n\n\n\n<ul><li><strong>Property tax:<\/strong> <\/li><\/ul>\n\n\n\n<p>Property\ntax is imposed on owners of any residential land, building, etc. These taxes\nare delegated by local authorities after the proper valuation of the area.<\/p>\n\n\n\n<ul><li><strong>Estate tax<\/strong>: <\/li><\/ul>\n\n\n\n<p>This\ntax arises on the estate or total property of the person left behind after its\ndeath.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Indirect_Taxation\"><\/span>Indirect\nTaxation:<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Some of the major types of indirect taxation in India are as mentioned below:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" width=\"576\" height=\"336\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/04\/image-63.png\" alt=\"types of indirect taxation in India\" class=\"wp-image-6942\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/04\/image-63.png 576w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/04\/image-63-300x175.png 300w\" sizes=\"(max-width: 576px) 100vw, 576px\" \/><\/figure>\n\n\n\n<ul><li><strong>Goods and Service Tax (GST):<\/strong> <\/li><\/ul>\n\n\n\n<p>The goods and services tax (GST) is one of the categories of\nthe indirect tax which has connected or subsumes around 17 various types of\nindirect taxes as existed before, such as service tax, state AVT, central tax,\nand many others. This is a value-added tax (VAT) as levied on various goods and\nservices as sold in India for its domestic consumption. This tax is indirect\ntax, which is endured by consumers only, but that is to be paid by sellers to\nthe government. This is a major source of income for the government, which\nindirectly makes a burden on consumers only.<\/p>\n\n\n\n<ul><li><strong>Customs duty<\/strong>: <\/li><\/ul>\n\n\n\n<p>Custom duty is indirect tax to be levied on all goods that are imported and exported in and outside India. A tax that is levied while importing goods is called Import duty, and the other is Export duty. This type of indirect tax is regulated as per the provisions of the <strong><em>Customs Act of 1962<\/em><\/strong><sup><a href=\"http:\/\/www.cbic.gov.in\/htdocs-cbec\/customs\/cs-act\/cs-act-ch1-revised3\"><strong><em>[1]<\/em><\/strong><\/a><\/sup>, according to which government shall levy duty on both export and import. Any matters related to this are administered and regulated under the Department of Revenue of the Ministry of Finance by the CBEC (Central Board of Excise and Customs).<\/p>\n\n\n\n<ul><li><strong>Value Added Tax (VAT):<\/strong><\/li><\/ul>\n\n\n\n<p>A VAT is another category of indirect taxation in India,\nwhich is particularly a consumption tax that is imposed on any products when\nits value is increased during the supply chain from the time of production till\nits sale. After the introduction of GST, VAT has been excluded from many items,\nbut on certain items such as alcohol, it is still applicable.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Difference_between_Direct_taxation_and_Indirect_taxation\"><\/span>Difference\nbetween Direct taxation and Indirect taxation:<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<table class=\"table table-bordered\"><tbody><tr><td><\/td><td>\n  <strong>Direct Tax<\/strong>\n  <\/td><td>\n  <strong>Indirect Tax<\/strong>\n  <\/td><\/tr><tr><td>\n  1\n  <\/td><td>\n  <em>It\n  is imposed on income and profits<\/em>\n  <\/td><td>\n  <em>It\n  is imposed on all goods and services<\/em>\n  <\/td><\/tr><tr><td>\n  <em>2<\/em>\n  <\/td><td>\n  <em>It\n  is to be paid by Individuals and businesses organizations<\/em>\n  <\/td><td>\n  <em>It\n  is to be paid by End-consumers<\/em>\n  <\/td><\/tr><tr><td>\n  3.\n  <\/td><td>\n  Amount of taxation depends on income and\n  profits generated by individual\n  <\/td><td>\n  Tax imposed is to be same for all category\n  of people\n  <\/td><\/tr><tr><td>\n  4. \n  <\/td><td>\n  This tax is of non-transferable nature\n  <\/td><td>\n  This tax is of transferable nature\n  <\/td><\/tr><tr><td>\n  5. \n  <\/td><td>\n  Some individual do tax evasion by wrongly\n  disclosing their incomes\n  <\/td><td>\n  Tax evasion is not possible\n  <\/td><\/tr><tr><td>\n  6. \n  <\/td><td>\n  It is progressive in nature. \n  <\/td><td>\n  It is regressive in nature\n  <\/td><\/tr><tr><td>\n  7. \n  <\/td><td>\n  Collection is of Complex nature. \n  <\/td><td>\n  Collection is not of very complex form and\n  can be easily collected\n  <\/td><\/tr><tr><td>\n  8. \n  <\/td><td>\n  Some examples are Income tax and securities\n  transaction tax (SAT)\n  <\/td><td>\n  Some examples are GST, VAT and excise duty\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion:<\/strong> <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>While taxes generally impose a heavy burden on individuals and businesses, but play an abundant role in building the economy. Taxes are the main source of income for government that helps to build a nation, healthcare, infrastructure, defense, welfare initiatives, etc. So it is the responsibility of every citizen of India to pay taxation. But still many people are evading taxes, but the government is taking proper initiatives to avoid tax evasion.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/online-income-tax-return-filing-without-form-16\/\">Income Tax Return Filing without Form 16<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The government imposes taxes on both individuals and companies, which are a major source of income for the government. The amount collected from taxes helps the government to build an economy that helps the government meeting numerous public expenses. Taxation can be defined as pecuniary burden that is imposed on individuals and corporations to support [&hellip;]<\/p>\n","protected":false},"author":21,"featured_media":6946,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[152],"tags":[497],"acf":{"service_id":"78"},"authorName":"Navdeep Kaur","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/IMG_20190122_114933.jpg","authorDescription":"Navdeep is working as legal counsel in Enterslice group companies having more than 4 years of experience. She has expertise in legal, corporate and regulatory matters.","postViews":11423,"readingTime":5,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/6939"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/21"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=6939"}],"version-history":[{"count":14,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/6939\/revisions"}],"predecessor-version":[{"id":23741,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/6939\/revisions\/23741"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/6946"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=6939"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=6939"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=6939"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}